funk bolton - fblaw.com r. mccann renl.tundermann james f. taylor eric b. myers charles d. macleod...

DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADER

GARY C. HARRIGER

DEREK B. YARMIS

FuNK & BOLTONA PROFESSIONAL ASS()CIATION

AlTORNEYS AT LAW

100 LIGHT STREET, SUITE 1000BALTIMORE, MARYLAND 2 il 202-1036

(410) 659-7700

FACSIMILE (41 0) 65S~-7773

INSURANCE LAW HULLETIN

MICHAEL R. McCANN

REN L. TUNDERMANN

JAMES F. TAYLOR

ERIC B. MYERS

CHARLES D. MACLEOD

ARTHUR A. RENKWITZ

OF COUNSEL

JEFFERSON L. BLOMQUIST

J. FRANK NAYDEN

DEBORAH R. RIVKIN

Re: Court Holds Plaintiff Must Take Rule 30(b)(6) Deposition OfDefendant Insurer At Its Principal Place of Business

The United States District Court for the District of Maryland recently.held that thedeposition of the defendant insurer's Federal Rule 30(b)(6) designee must be taken at thedefendant's principal place ofbusiness in another state, rather than in Maryland.

The plaintiff filed suit seeking an order compelling the issuance of an insurance policy forwhich he had applied. The plaintiff sought to notice the Rule 30(b)(6) deposition of thedefendant insurer in Maryland, but was advised the defendant's designee would only beproduced in the state where the defendant's home office was located. The plaintiff filed amotionto compel the deposition in Maryland.

The Court, after denying the motion on unrelated procedural grounds, held the plaintiffhad failed to rebut the presumption that the deposition of a corporation by its agents and officersshould be taken at its principal place of business, especially when the corporation is thedefendant. The Court rejected the plaintiffs argument that, given the insurer's substantialbusiness presence in Maryland and the fact the insurer is better able to pay the costs associatedwith the deposition, the designee should be required to travel to Maryland.

For further information, please contact Derek B, Yarmis, who represented the insurer inthis matter.

May 1,2000No: 2000-1

35507

Applicability of the legal principles discussed may differ substantially in individual situations.The information contained herein should not be construed as individual legal advice.

DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADER

GARY C. HARRIGER

DEREK B. YARMIS

FuNK & BOI~TON

A PROFESSIONAL ASSOCIATION

ATTORNEYS AT LAW

100 LIGHT STREET, SUITE 1000

BALTIMORE, MARYLAND a 1202-1 036(410) 659-7700

FACSIMILE (410) 659-7773


MICHAEL R. MCCANN

REN L. TUNDERMANN

JAMES F. TAYLOR

ERIC.B. MYERS

CHARLES D. MACLEOD

ARTHUR A. RENKWITZ

OF COUNSEL

.JEFFERSON L. BLOMQUIST

J. FRANK NAYDEN

DEBORAH R. RIVKIN

.JOHN R. STIERI-IOFF

Re: Insured Fails To State Claim Under District Of Columbia's Insurance CodeAnd Consumer Protection Procedures Act

After her claim for disability insurance benefits was terminated, an insured filed suit inthe Superior Court for the District of Columbia against her disability insurer. The insured soughtto state claims for unfair and unreasonable practices in violation of Section 35-1706(b) of theDistrict of Columbia Insurance Code and unlawful trade practices in violation of the District ofColumbia Consumer Protection Procedures Act, D.C. Code Section 28-3904.

After removing the action to Federal Court, the insurer moved to dismiss both claims.The Court granted the motion. First, the Court held the pertinent provision in the District ofColumbia Insurance Code concerned insurance rate disputes, riot policy benefit claims.Moreover, the Court concluded the Insurance Code does not create a private right of action.

Second, the Court refused to give extraterritorial effect to the District of ColumbiaConsumer Protection Procedures Act. The insured did not reside in the District of Columbiawhen she purchased the policy or when she applied for benefits under the policy. Based on thesefacts, the Court refused to recognize a claim under the District of Columbia Consumer ProtectionProcedures Act.

If you would like a copy of the Court's opinion or have further questions, please contactBryan D. Bolton, who represented the insurer in this rnatter.

June 28, 2000No. 2000-2

45800.003:36976


DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADER

GARY C. HARRIGER

DEREK B. YARMIS

FuNK & BOLTONA PROFESSIONAL A~jSOCIATION

ATTORNEYS AT LAW


BALTIMORE, MARYLAND 21202-1036(410) 659-77'00

FACSIMILE (410) 6!59-7773

INSURANCE LAW lJULLETIN

MICHAEL R. MCCANN

REN L. TUNDERMANN

JAMES F. TAYLOR

ERIC B. MYERS

CHARLES D. MACLEOD

ARTHUR A. RENKWITZ

MADELEINE D. STECKEL

OF COUNSEL


J. FRANK NAYDEN

DEBORAH R. RIVKIN

JOHN R. STIERHOFF

Re: Court Holds Health-Care Provider Cannot Maintain Private Right OfAction Against Health Maintenance Organization Under MarylandHealth-General Article

In a case of first impression in Maryland, the United States District Court for the Districtof Maryland recently held that a health-care provider cannot maintain a private right of actionagainst a health maintenance organization under §§ 19-712 and 19-712.1 of the Maryland HealthGeneral Article (1996).

After an intermediate entity with which plaintiff contracted filed for bankruptcyprotection, plaintiff filed this action against the "upstream" HMO seeking reimbursement forhealth-care services it allegedly provided to members of the HMO. Relying on §§ 19-712 and19-712.1, plaintiff alleged the HMO was liable for the financial obligations of the bankruptentity. The HMO moved to dismiss, arguing the applicable statutes did not confer a private rightof action. The Court agreed and granted the motion to dismiss.

In the absence of any express indication that the Maryland General Assembly intended toconfer a private right of action, the Court concluded several points weighed against such afinding. First, the statutes contain an express administrative remedy that is enforced by theInsurance Commissioner and subject to judicial review. Second, the administrative remedy isadequate to protect the plaintiff's rights. Third, in view of the express administrative remedy, "itis highly improbable that the legislature 'absentmindedly forgot to mention an intended privateaction. '"

If you have any questions or would like a copy of the Court's opinion, please contactBryan D. Bolton, who represented the health maintenance organization in this matter.

August 15, 2000No. 2000-3

20021.016:38030v2


DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADER

GARY C. HARRIGER

DEREK B. YARMIS


JOI-IN R. STIERHOFF

REN L. TUNDERMANN

FUNK & BO~LTON


ATTORNEYS AT LAW



FACSIMILE (410) 659-7773

INSURANCE LAW BULLETIN

MICHAEL R. McCANN

JAMES F. TAYLOR

ERIC B. MYERS

CHARLES D. MACLEOD

E. ELIZABETH STABER


OF COUNSEL

J. FRANK NAYDEN

DEBORAH R. RIVKIN

RE: Court Declares Disability Insurance Policy Lapsed DespiteAllegations That Disability Predated Lapse And Insurer Failed ToSend Premium Notice

The United States District Court for the JDistrict of Maryland recently held that adisability income insurance policy lapsed for nonpayment of premium even though the allegeddisability commenced before the policy lapsed and the insurer allegedly failed to send the insureda premium notice.

The insured made claim for disability benefits nearly three years after his policy lapsed.The insurer denied the claim and filed a declaratory judgment action. After limited discoverywas taken on the lapse issue, the insurer filed a motion for summary judgment.

Granting summary judgment in favor of the insurer, the Court rejected the insured'sargument that liability attached when the alleged disability began, ten days before the policylapsed. The Court reasoned that the claim did not accrue until after the six-month eliminationperiod and, therefore, the policy had long since lapsed. The Court also rejected the insured'sargument that the insurer was estopped from asserting the policy had lapsed because a premiumnotice for the unpaid premium was never sent. The insurer proved, through computer-generatedprintouts, that it followed its usual and customary business practice of mailing the premiumnotice to the insured.

If you have any questions or would like a copy of the Court's opinion, please contactDerek B. Yarmis, who represented the insurer in this matter, at 410-659-7762 [email protected].

October 5, 2000No. 2000-4


DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADER

GARY C. HARRIGER

DEREK B. YARMIS


JOHN R. STmRHOFF

REN L. TUNDERMANN

FUNK & BO]~TON

A PROFESSIONAL ASl50CIATION

ATrORNEY5 AT I..AW

100 LIGHT STREET, SUITE 1000BALTIMORE, MARYLAND a 1202-1 036

(4 t 0) 659-7700

FACSIMILE (410) 659-7773


MICHAEL R. MCCANNJAMES F. TAYLOR

ERIC B. MYERS

CHARLES D. MAcLEOD

E. ELIZABETH STABER


OF COUNSEL

J. FRANK NAYDEN

DEBORAH R. RIVKIN

Re: Insurer's Termination Of Long-Term Disability Benefits WasReasonable Despite Inherent Conflict Of Interest

.......

The United States District Court for the District of Maryland recently held that aninsurer's termination of long-term disability benefits under an ERISA plan was reasonable,despite an inherent conflict of interest, where the claimant had failed to submit medical evidencesupporting his physician's change of opinion.

During administration of a claim, the claimant's physician submitted ari attendingphysician's statement stating that the claimant was capable of performing sedentary work andhandling low-stress situations. After the insurer terminated benefits, the same physician opinedthat the claimant should remain on disability and not reenter the workforce. Neither the claimantnor the physician offered any medical 'evidence supporting this change of opinion. After theinsurer upheld the claim determination, the claimant filed this action.

The Court concluded the insurer had an inherent conflict of interest and therefore appliedthe "modified abuse of discretion" or "sliding scale" deferential standard of review. The Courtheld the insurer's termination of benefits was reasonable, however, because the physician's postclaim termination change of opinion was a legal conclusion unsupported by any medicalevidence.


November 1,2000No. 2000-5


39394v3

nAVID M. FUNl{

nnYAN D. uorzroxUUYSON F. POI~lIAM

I,INDSEY A. RADl!:R

GARY C. HARRIGER

I>EREl{ n. YARMIS

.JEFFERSON I,. DLOMQUIST

.JOIIN R. STIERlIOFF

REN I •• TUNDI!:RMANN

FuNK & BC_LTONA PROFESSIONAL ASSOCIATION

ATTORNEYS AT LAW


BALTIMORE, MARYLAND 21202-1036(410) 659-7700

FACSIMILE (410) 659-7773


MICHAEL R. McCANN

JAMES F. TAYI~OR

ERIC n. MYERS

CIIARLES D. MACLEOD

E. EI.IZADETH STADER


OF COUNSEL

.J. FRANK NAYDEN

DEBORAH R. RIVKIN

Re: Court Holds Underwriting Guidelines Should Be Given A Natural AndCommon Sense Meaning

The Circuit Court for Baltimore City recently held that an insurer properly applied itsunderwriting guidelines in refusing to provide professional liability insurance to a physician whohad been convicted of Medicaid fraud, even though the judgment of conviction had beenstricken.

A physician applied for professional liability insurance shortly after his conviction hadbeen stricken. The insurer refused to provide the coverage because its underwriting guidelinesmade an applicant ineligible if there is evidence indicating "conviction" of a crime involvingdeceit or falsification. The physician complained to the Insurance Commissioner, who, after ahearing, ruled against the insurer and ordered that the coverage be provided.

The Circuit Court reversed, holding the insurer' s refusal to issue a policy was reasonablyrelated to its economic and business purposes. See Md. Code Ann., Ins. § 27-501. The Courtfurther held the Commissioner erred by applying a narrow legal and technical meaning to theword "conviction," rather than a natural and common-sense meaning .

. If you have any questions, please contact Jefferson L. Blomquist, who represented theinsurer in this matter, at 410-659-4970 or jblomquisttsfblaw.com.

December 1, 2000No. 2000-6


DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADERGARY C. HARRIGER

DEREK B. YARMIS


JOHN R. STIERHOFF

REN L. TUNDERMANN

FUNK & BO:LTONA PROFESSIONAL ASSOCIATION

A".ORNEYS AT LAW

I 00 LIGHT STREET, SUITE 1000

BALTIMORE, MARYLAN021202-1 036(410) 659-7,'00

FACSIMILE (410) 6S9-7773

INSURANCE LAW ltJULLETIN

LAURIE WINKLER THURTLE

MICHAEL R. McCANN

JAMES F. TAYLOR

ERIC B. MYERS

CHARLES D. MACLEOD

E. ELIZABETH STADER


KELLY E. PHILLIPS

OF COUNSEL

JACK A. GULLO, JR.

J. FRANK NAYDEN

DEBORAH R. RIVKIN

Re: Court Declares Disability Insurance Policy Null And VoidBased On Claim Fraud

The United States District Court for the District of Maryland recently declared a disabilityincome insurance policy null and void because the insured made fraudulent misrepresentations insupport of her claim for benefits.

After paying disability benefits for several years, the insurer discovered that the insured'soccupational activities were inconsistent with representations made in supplemental statementsof claim. The insurer terminated benefits and filed a complaint in federal court seeking adeclaration that the policy is null and void and damages for fraud.

After a 44-day bench trial, the district court: found that the insured made fraudulentmisrepresentations to the insurer for the purpose of inducing the payment of benefits. The courtheld that the insured breached the implied covenant of good faith and fair dealing, whichobligated the parties "to deal fairly and honestly with one another." The court declared the policynull and void and awarded the insurer over $125,000 in damages.

If you have any questions or would like a copy of the court's opinion, please contactBryan D. Bolton, who represented the insurer in this matter, at 410-659-7754 [email protected].

January 12, 2001No: 2001-1


DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADER

GARY C. HARRIGER

DEREK B. YARMIS


JOHN R. STIERHOFF

REN L. TUNDERMANN

FuNK & BO:LTON


ATTORNEYS AT LAW


BALTIMORE, MARYLAND 21202-1036(410) 659-7700

FACSIMILE (41 0) 6~59-7773



MICHAEL R. McCANN

JAMES F. TAYLOR

ERIC B. MYERS

CHARLES D. MACLEOD

E. ELIZABETH STABER


KELLY E. PHILLIPS

OF COUNSEL

JACK A. GULLO, JR.

J. FRANK NAYDEN

DEBORAH R. RIVKIN

Re: Court Holds Shotgun Homicide 'Vas A Suicide Under LifeInsurance Policy Exclusion

The Court of Special Appeals of Maryland recently held that, in determining whether aninsured's death was a suicide, the matter should be considered from the perspective of theinsured.

The insured, deeply in debt and the target of a criminal investigation, wanted to die.Aware of the suicide exclusion in her life insurance policies, the insured sought help from a closefriend. In an effort to disguise her death as a hit, the insured had her friend hold a shotgun whileshe ran a string around his leg to the trigger. When the insured pulled the string and the gunfailed to fire, she pleaded with her friend to pull the trigger. He complied, and the insured died.The friend later pled guilty to voluntary manslaughter.

The trial court entered judgment against the insurer. On appeal, the Court held homicideand suicide are not mutually exclusive, because suicide is determined from the insured'sperspective. From this perspective, the insured's death occurred by her own volition and intent.The Court directed the entry of judgment for the insurer.

If you have any questions or would like a copy of the Court's opinion, please contactBryan D. Bolton, who represented the insurer in this matter, at 410-659-7754 [email protected].

February 20, 2001No: 2001-2

42377v2


DAvID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADER

GARY C. HARRIGER

DEREK B. YARMIS


JOHN R. STIERHOFF

REN L. TUNDERMANN

FuNK & BO:LTONA PROFESSIONAL AS,SOCIATION

ATTORNEYS AT LAW



FACSIMILE (41 0) 6~59-7773

INSURANCE LAw HULLETIN


MICHAEL R. MCCANN

JAMES F. TAYLOR

ERIC B. MYERS

CHARLES D. MACLEOD

E. ELIZABETH STABER

- MADELEINE D. STECKEL

KELLY E. PHILLIPS

OF COUNSEL

JACK A. GULLO, JR.

J. FRANK NAYDEN

DEBORAH R. RIVKIN

Re: Disability Claimant Must Pursue and Exhaust ERISA Plan.Remedies Even If The Insurer Conc:ludes The Claimant Is NotCovered By The Plan

The United States District Court for the District of Maryland recently held that pursuit'and exhaustion of plan remedies is not futile simply because an insurer denies a claim fordisability benefits on the ground that the claimant is' not covered under a group insurancecontract.

The claimant sought disability benefits under a group insurance contract issued to hisemployer. The insurer determined the claimant was not eligible for benefits because he was notproperly enrolled as a covered employee. Instead of pursuing plan remedies, the claimant filed acomplaint in state court. The insurer removed the action to FederalCourt and moved to dismiss.

'The claimant argued pursuing an ERISA appeal would be futile because an insurer who"does not recognize the insured as holding a policy with the company ... will not prudentlyadhere to the policy terms .." Granting the motion to dismiss, the Court held the claimant had notmade a "clear and positive" showing of futility. There was no evidence. the insurer was not fairminded. The Court further observed that, if given a chance, the insurer might be persuaded thatthe claimant is covered under the group contract.


March 20, 2001No: 2001-3

.Applicab~lity of t~e legal principles discussed may differ substantially in individual situations.The information contained herein should not be construed as individual 'legal advice.

DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADER

GARY C. HARRIGER

DEREK B. YARMIS


JOHN R. STIERHOFF

REN L. TUNDERMANN

FuNK & BO:LTON

A PROFESSIONAL ASiSOCIATION

ATTORNEYS AT LAw100 LIGHT STREET. SUITE 1000

BALTIMORE. MARYLAND 21202-1036(410) 659-7700

FACSIMILE (410) ES!59-7773



MICHAEL R. McCANN

JAMES F. TAYLOR

ERIC B. MYERS

CHARLES D. MACLEOD

E. ELIZABETH STABER


KELLY E. PHILLIPS

OF COUNSEL

JACK A. GULLO, JR.

J. FRANK NAYDEN

DEBORAH R. RIVKIN

Re: Court Sustains ERISA Fiduciary's Resolution Of ConflictingEvidence

The United States District Court for the District of Maryland recently held that an insurerdid not abuse its discretion by denying a claim for accidental death benefits based on theinsurer's resolution of a conflict between the decedent's medical records and the claimant'saffidavits.

The wife of an ERISA plan participant sought accidental death benefits, claiming herhusband died from head trauma after falling from a ladder. Although the medical recordsrevealed a recent history of hypertension and headaches, the claimant and her medical expertsubmitted affidavits claiming the decedent was healthy and did not suffer from headaches.

The insurer asked an independent review physician to assume the medical records wereaccurate. Based on the medical records, the physician concluded an underlying medicalcondition likely caused the insured's fall. The insurer then denied the claim because the deathwas not due solely to an accident. The Court granted the insurer summary judgment, holding theERISA plan conferred discretion on the insurer, and the insurer was responsible for decidingwhether to believe the medical records.

If you have any questions or would like a copy of the Court's opinion, please contactBryanD. Bolton, who represented the insurer in this matter, at 410-659-7754 orbbolton @tblaw.com.

May 25,2001No: 2001-4

45800.003:446Al>plicability of the legal principles discussed may differ substantially in individual situations.The information contained herein should not be construed as individual legal advice.

DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LIND~EYA. RADER

GARY C. HARRIGER

DEREK B. YARMIS

JEFFERSON L. BLOMQmST

JOHN R. STIERHOFF

REN L. TUNDERMANN

FuNK & BOlc...TON

A PROFESSIONAL AS:SOCIATION

ATTORNEYS AT LAw100 LIGHT STREET, SUITE 1000

BALTIMORE, MARYLAND z1,202-1 036(410) t?59-77'00

FACSIMILE (410) 6!:i9-7773



MICHAEL R. MCCANN

JAMES F. TAYLOR

ERIC B. MYERS

CHARLES D. MACLEOD

E. EL,IZABETH STABER


KELLY E. PHILLIPS

OF COUNSEL

JACK A. GULLO, JR.

J. FRANK NAYDEN

DEBORAH R. RIVKIN

Re: Insurance Commissioner Holds Insurer's Decision To Deny Total DisabilityBenefits Without Conducting An !ME Did Not Violate Statute, Regulation,

I .

MIA Policy, Or The Insurance Policy

The Maryland Insurance Commissioner recently ruled that an insurer's decision to denydisability benefits, based on the opinion of its in-house physician and without conducting' anIndependent Medical Examination ("IME"), was pot arbitrary or capricious.

An insured physician sought total. disability benefits due to a back condition. After theclaim was denied, the insured filed a complaint with the Maryland Insurance Administration(":MIA"). The, MIA initially found the insurer' s refusal to pay the claim was arbitrary orcapricious based, in part, on the failure to conduct an Dvm. The insurer requested a hearing.

At the hearing" the MIA argued the insurer had ignored the opinions of the four treatingphysicians and relied exclusively on the opinion of the in-house physician. The:MIA furtherargued the in-house physician had not seen the insured and the insurer had failed to conduct anThffi. The Administrative Law Judge rejected the MIA's weighing of the number of physicianopinions and found no obligation to conduct an IME. "No statute, regulation, policy statement ofthe MIA, or provision in the policy requires the [insurer] to" perform an IME. TheCommissioner adopted the recommended decision as his final decision.

If you have any questions or would like a copy of the decision, please contact JeffersonL. Blomquist, who, represented the insurer in this matter, at 410-659-4970 [email protected].

June 4, 2001No. 2001-5


DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADER

GARY C. HARRIGER

DEREK B. YARMIS


JOHN R. STIERHOFF

REN L. TUNDERMANN

FuNK & BO:LTON


ATTORNEYS AT LAW






MICHAEL R. McCANN

JAMES F. TAYLOR

ERIC B. MYERS

CHARLES D. MACLEOD

E. ELIZABETH STABER

KELLY E. PHILLIPS

OF COUNSEL

JACK A. GULLO, JR.

J. FRANK NAYDEN

DEBORAH R. RIVKIN

Re: Court Holds Insurance Comntissioner Has ExclusiveJurisdiction Over Claim To Compel Issuance Of DisabilityInsurance Policy

The United States District Court for the District of Maryland recently held that a claimfor specific performance of an alleged agreement to issue a disability insurance policy must bepursued before the Insurance Commissioner.

After an insurer declined an application for disability insurance based on medicalconsiderations, the applicant filed a complaint in state court, alleging the insurer's managingagent told the applicant's broker that a policy would be issued despite the applicant's medicalhistory. The insurer removed the action to federal court and, after the close of discovery, movedfor summary judgment.

Granting the insurer summary judgment, the court held the Maryland InsuranceCommissioner has exclusive jurisdiction to enforce an alleged oral agreement to issue aninsurance policy. The court also granted the insurer summary judgment on a negligentmisrepresentation claim because "promissory or predictive statements" cannot survive in theabsence of evidence that the '''promisor' or 'predictor' made the statement with the presentintention not to perform."


July 27,2001No: 2001-6

45923v5


DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADER

GARY C. HARRIGER

DEREK B. YARMIS


JOHN R. STIERHOFF

REN L. TUNDERMANN

FuNK & BO:LTON


ATTORNEYS AT LAw100 LIGHT STREET, SUITE 1000

BALTIMORE, MARYLAND ;21202-1036(410) 659-7700




MICHAEL R. MCCANN

JAMES F. TAYLOR

ERIC B. MYERS

CHARLES D. MACLEOD

E. ELIZABETH STABER

KELLY E. PHILLIPS

OF COUNSEL

JACK A. GULLO, JR.

J. FRANK NAYDEN

DEBORAH R. RIVKIN

Re: Court Holds Estoppel Based On ''Explicit Assurances" Is Not Part Of TheFederal Common Law Of ERISA

The United States Court of Appeals for the Fourth Circuit recently held that principles ofwaiver and estoppel are not part of the common law of ERISA and refused to recognize an"explicit assurances" exception.

At the request of the insured, the insurer provided assurances that it would pay 48 monthsof disability benefits, unaware the insured's birth date was misstated in the application. Afterlearning of the correct birth date, the insurer advised the insured (i) he would receive only 42months of benefits, and (ii) he would not have to repay the overpayments made as a result of themisstated age. The insured filed a lawsuit in state court seeking the six additional months ofbenefits, and the insurer removed the action to Federa1 Court based on the ERISA preemption.

The District Court held the insurer's "explicit assurances" to pay 48 months of benefitscreated an estoppel. The District Court further held that the insurer waived its right not to paythe additional benefits. The Fourth Circuit rejected both holdings, held the "explicit assurances"exception is not part of the federal common law of ERISA, and directed the entry of judgment infavor of the insurer.

If you have any questions or would like a copy of the decision, please contact Bryan D.Bolton, who represented the insurer in this matter, at 410-659-7754 or [email protected].

August 10,2001No. 2001-7

46631


DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADER

GARY C. HARRIGER

DEREK B. YARMIS


JOHN R. STIERHOFF

REN L. TUNDERMANN

*ADMITTED IN NY ONLY


ATTORNEYS AT LAW

100 LIGHT STREET, SLJITE 1000BALTIMORE, MARYLAND 21202-1036

(410) 659-7700

FACSIMILE (41 0) 65~~-7773

INSURANCE LAW B"ULLETIN

MICHAEL R. MCCANN

JAMES F. TAYLOR

ERIC B. MYERS

CHARLES D. MACLEOD

ANTONIO A. TROTTA, 111*

E. ELIZABETH STABER

CHERYL A. C. BROWN

LEE ANN LEZZER

OF COUNSEL

JACKA. GULLO, JR.

J. FRANK NAYDEN

DEBORAH R. RIVKIN

Re: Court Sustains Removal Of Proceeding To Perpetuate TestimonyConcerning Variable Life Insurance Policy VVith $75,057 Death Benefit

The United States District Court for the District of Maryland recently held that aproceeding to perpetuate testimony filed in State Court was properly removed to Federal Courtbecause the value of the underlying matter in controversy exceeded the sum or value of$75,000.

Plaintiff applied for a variable life insurance policy on her mother in the face amount of$75,000. A Temporary Insurance Agreement was issued, and the proposed insured died the nextday. Instead of filing a complaint for benefits, plaintiff filed a notice in State Court to perpetuatethe insurer's testimony. The insurer removed the notice to Federal Court based on diversityjurisdiction.

Plaintiff filed a motion to remand, stipulating she would not seek damages in excess of$75,000. The insurer opposed the motion, contending that the death benefits, if due, included theface amount of $75,000 plus a variable death benefit of $57. Denying the motion to remand, theCourt explained that, in the absence of a complaint setting forth the damages sought, the Courtcould not determine to a legal certainty that the matter in controversy was $75,000 or less.

If you have any questions or would like a copy of the decision, please contact Bryan D.Bolton, who represented the insurer in this matter, at 410-659-7754 or [email protected].

September 24, 2001No. 2001-8

47591v2


DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADER

GARY C. HARRIGER

DEREK B. YARMIS


REN L. TUNDERMANN

CHARLES D. MACLEOD

*ADM:I'rl'ED IN NY ONLY

FUNK & BO]~TON


ATTORNEYS AT LAW

100 LIGHT STREET, SUITE 1000BALTIMORE, MARYLAND ,~1202-1036

(410) 659-7700

FACSIMILE (410) 659-7773


JAMES F. TAYLOR

ERIC B. MYERS

ANTONIO A. TROTTA, 111*

E. ELIZABETH STABER

CHERYL A. C. BROWN

LEE ANN LEZZER

OF COUNSEL

JACK A. GULLO, JR.

MICHAEL R. MCCANN

J. FRANK NAYDEN

DEBORAH R. RIVKIN

JOHN R. STIERHOFF

Re: Court Holds Part Of Maryland's Appeals And Grievance LawPreempted By ERISA

On October 12, 2001, the Circuit Court for Baltimore City held that the authority of theMaryland Insurance Commissioner under Maryland's Appeals and Grievance Law to order aninsurer to pay a claim denied as medically unnecessary is preempted by the Employee RetirementIncome Security Act of 1974 ("ERISA").

An insurer of an employee benefit plan denied claims as medically unnecessary. After aquasi-judicial hearing, the Commissioner entered an order under Maryland's Appeals andGrievance Law, Md. Code Ann., Ins. § 15-10A-01 et seq., requiring the insurer to pay the claimsand imposing an administrative penalty. The insurer filed a petition for judicial review.

Reversing in part, the Circuit Court held that Section 502(a)(I)(B) of ERISA provides thesole remedy for the recovery of ERISA plan benefits. That portion of the Appeals and GrievanceLaw authorizing the Commissioner to order an insurer to pay plan benefits conflicts withERISA's remedial scheme and is preempted by ERISA. The Court held, however, that theCommissioner's authority to regulate the insurer's adjudication of claims through internal andexternal review procedures is not preempted by ERlSA. The Commissioner, therefore, mayimpose administrative penalties for violations of the Appeals and Grievance Law process. Boththe insurer and the Commissioner are expected to appeal.

For further information, please contact David M. Funk, who represented the insurer inthis matter, at 410-659-7752 or [email protected].

October 17, 2001No: 2001-9


DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADER

GARY C. HARRIGER

DEREK B. YARMIS


REN L. TUNDERMANN

CHARLES D. MACLEOD

• ADMITTED IN TX ONLY

FUNK & BOJLTON


ATTORNEYS AT LAW


BALTIMORE, MARYLAND j~ 1202-1 036(410) 659-77'00

FACSIMILE (410) 6!:i9-7773


JAMES F. TAYLOR

ERIC B. MYERS

CYNTHIA L. McCANN MULLIGAN

E. ELIZABETH STABER

CHERYL A. C. BROWN

LEE ANN LEZZER

OF COUNSEL

JACK A. GULLO, JR.

MICHAEL R. McCANN

J. FRANK NAYDEN

KAY DOUGHTY PHILLIPS·

DEBORAH R. RIVKIN

JOHN R. STIERHOFF

Re: Circuit Court Holds Insurance Commissioner Exceeded HisAuthority In Reviewing Rates Proposed By Nonprofit HealthService Plan

The Circuit Court for Baltimore City recently held that the Maryland InsuranceCommissioner exceeded his statutory authority by disapproving a rate filing based on theCommissioner's determination that the rates were not affordable. The Commissioner's inquiry,according to the Court, should have been limited to actuarial considerations.

A nonprofit health service plan submitted rates for approval to the Commissioner.Although the proposed rates were actuarially justified, the Commissioner disapproved the ratesclaiming the plan should use savings realized from a. hospital discount to make the rates moreaffordable. After a hearing, the Commissioner affirmed his decision and the plan filed a petitionfor judicial review.

Reversing the Commissioner's decision, the Court held the Commissioner should havelimited his rate-review to determining whether the rates were excessive in relation to the benefitsbased on actuarial principles. Public policy goals, such as making rates more affordable,according to the Court, were not within the Comrnissioner's administrative purview. TheCommissioner, therefore, exceeded his authority by disapproving the rate filing based onaffordability considerations.

For further information, please contact David M. Funk, who represented the nonprofithealth service plan in this matter, at 410-659-7752 or [email protected].

January 10, 2002No. 2002-1


DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

LINDSEY A. RADER

GARY C. HARRIGER

DEREK B. YARMIS


REN L. TUNDERMANN

CHARLES D. MACLEOD

• ADMITTED IN TX ONLY

FUNK & BOJLTON


ATTORN EYS AT LAW


BALTIMORE, MARYLAND ;21202-1036(410) 659-77'00

FACSIMILE (410) 659-7773


JAMES F. TAYLOR

ERIC B. MYERS

CYNTHIA L. McCANN MULLIGAN

BRADLEY J. NEITZEL

E. ELIZABETH STABER

CHERYL A. C. BROWN

LEE ANN LEZZER

OF COUNSEL

JACK A. GULLO, JR.

MICHAEL R. McCANN

J. FRANK NAYDEN

KAY DOUGHTY PHILLIPS·

DEBORAH R. RIVKIN

JOHN R. STIERHOFF

Re: Court Holds Insured Is Not Totally Disabled If He Is Able ToPerform Any Of His Substantial Occupational Duties

TM United States District Court for the District of Maryland, applying the common lawof ERISA, recently held that, because a policy of disability insurance must be read as a whole,the definition of "total disability" must be construed in harmony with the definition of "residualdisability."

After terminating a claim for total disability benefits based on alleged claim fraud, theinsurer filed a complaint against its insured, seeking damages for unjust enrichment and adeclaration that the policy is null and void or, alternatively, lapsed for nonpayment of premium.The insured filed a counterclaim for benefits and, after the close of discovery, moved forsummary judgment.

Denying summary judgment, the Court held that the definition of total disability - theinability "to engage in your occupation" - must be construed in harmony with the definition ofresidual disability - the inability "to do one or more of your substantial and material dailybusiness duties." The insured, therefore, is not entitled to total disability benefits if he canperform one or more of the substantial duties of his occupation. The Court also held that theinsurer's claims are cognizable under ERISA and "numerous documents and other evidencepresented by [the insurer] clearly establish a genuine dispute whether [the insured] wasmisrepresenting the extent of his disability ...."

If you have any questions or would like a copy of the court's opinion, please contactDerek B. Yarmis, who represented the insurer in this matter, at 410-659-7762 [email protected].

April 15, 2002No: 2002-1

53314v3 Applicability of the legal principles discussed may differ substantially in individual situations.The information contained herein should not be construed as individual legal advice.

DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

REN L. TUNDERMANN

DEREK B. YARMIS

CHARLES D. MACLEOD


LINDSAY A. RADER

+ADMI'rl'ED IN NE AND DC ONLY

++ ADMI'rl'ED IN VA ONLY

FuNK & BO][JTON

A PROFESSIONAL AS:SOCIATION

AlTORNEYS AT LAW

100 LIGHT STREET,- SUITE 1000

BALTIMORE, MARYLAND z 1202-1 036(410) 659-7700

FACSIMILE (410) 65,9-7773

INSURANCE LAW lIJULLETIN

JEROME D. BRESLI~

HUGH M. BERNSTEIN

JAMES F. TAYLOR

PETER C. ISMAY+"

CYNTHIA L. MCCANN

CHERYL A. C. BROWN

HISHAM M. AMIN

OF COUNSEL

JOHN A. ANDRYSZAK

GARY C. HARRIGER

MICHAEL R. MCCANN

J. FRANK NAYDEN

DEBORAH R. RIVKIN

JOHN R. STIERHOFF

Re: Court Holds Maryland's Appeals And Grievance Law Is NotPreempted By ERISA

On November 4,2002, the Court of Appeals of Maryland held that Maryland's Appealsand Grievance Law is not preempted by the Employee Retirement Income Security Act of 1974("ERISA").

An insurer of an employee benefit plan denied claims as medically unnecessary. After aquasi-judicial hearing, the Commissioner entered an order under Maryland's Appeals andGrievance Law, Md. Code Ann., Ins. § 15-10A-01 et seq., requiring the insurer to pay the claimsand imposing an administrative penalty. After the Circuit Court reversed the order in.part, theCourt of Appeals issued a writ of certiorari to review the judgment of the Circuit Court.

The Court of Appeals held that, although the: Appeals and Grievance Law "relates to"ERISA plans, the law falls under ERISA's saving clause, 29 U.S.C. § 1144(b)(2), as a lawregulating insurance and, therefore, is not preempted under principles of "field preemption."Relying on the Supreme Court's decision in Rush Prudential v. Moran, the Court rejected theinsurer's argument that the Appeals and Grievance law is preempted under principles of "conflictpreemption." According to the Court, the Appeals and Grievance Law does not "'implicateERISA's enforcement scheme at all, and [is] no different from the types of substantive stateregulation of insurance contracts' that the Supreme Court has 'permitted to survive preemption. '"

For further information, please contact David M. Funk, who represented the insurer inthis matter, at 410-659-7752 or [email protected].

November 15, 2002No: 2002-3


DAVID M. FUNK

BRYAN D. BOLTON

BRYSON F. POPHAM

REN L. TUNDERMANN

DEREK B. YARMIS

CHARLESD.MACLEOD


LINDSEY A. RADER

tADMlTfED IN NE AND DC ONLY

ttADMlTfED IN VA ONLY

FUNK & BOLTONA PROFESSIONAL ASSOCIATION

ATTORNEYS AT LAWTWELFTH FLOOR

36 SOUTH CHARLES STREETBALTIMORE, MARYLAND 21201-3020

(410) 659-7700

FACSIMILE (410) 659-7773

INSURANCE LAWnULLETIN

JEROME D. BRESLINt

HUGH M. BERNSTEIN

JAMES F. TAYLOR

PETER C. ISMAYtt

CYNTIDAL. MCCANN

CHERYL A. C. BROWN

HISHAMM. AMIN

OF COUNSEL:

JOHN A. ANDRYSZAK

GARYC. HARRIGER

MICHAEL R. MCCANN

J. FRANK NAYDEN

DEBORAH R. RIVKIN

JOHN R. STIERHOFF

Re: Court Dismisses Statutory Bad-Faith Claim Grounded OnForeign State's Law

The United States District Court for the District of Maryland recently dismissed astatutory claim for bad faith termination of long-term disability benefits because the foreignstate's law upon which the claim was based was inapplicable. •

After his claim for total disability benefits was terminated, the plaintiff filed a complaint.in state court against his insurer for breach of contract and statutory damages for first-party badfaith. The insurer removed the action to federal court and moved to dismiss.

Plaintiff argued that the foreign state's statutory bad faith law applied because, "[u]nderMaryland's choice of law rules, the law of the place of performance governs the issues ofperformance and/or breach." Although the insurer's principal place of business was in theforeign state, the Court held that the foreign state's law did not apply because the plaintiff is aMaryland resident, his policy was delivered in Maryland, and the premiums were paid inMaryland. The Court also dismissed a claim for breach of contract against the insurer's parentcompany because the parent company was not a party to the insurance contract.

For further information, please contact Bryan D, Bolton, who represented the insurer andparent company in this matter, at 410-659-7754 or [email protected].

December 6, 2002No: 2002-4

59273. Applicability of the legal principles discussed may differ substantially in individual situations.The information contained herein should not be construed as individual legal advice.

funk bolton - fblaw.com r. mccann renl.tundermann james f. taylor eric b. myers charles d. macleod...

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